Could U.S. Tariffs on China Have Environmental Benefits? A Carbon Intensity Perspective
The ongoing tariffs imposed by the United States on Chinese imports have largely been driven by geopolitical and economic considerations rather than environmental concerns. The official objectives have focused on protecting domestic industries, addressing intellectual property concerns, and rebalancing trade deficits. However while environmental considerations have not been stated as an aim, it’s worth asking: could these tariffs unintentionally support climate goals? By raising the price of certain imports, especially those from carbon-intensive sectors, tariffs could function in effect like a rudimentary carbon tax. We explore how the emissions profiles of Chinese manufacturing compare to other regions, and how trade barriers might create unintended environmental benefits, albeit at a cost to global economic efficiency.
China’s Carbon Intensity in Key Export Sectors
China’s position as the “world’s factory” has made it central to global supply chains, but also a major source of emissions. Several of China’s largest export sectors include steel, cement, and chemicals - all of which are markedly more carbon intensive than their counterparts in other regions. In the steel industry, China produces more than half of the world’s total output. Most of this production relies on the traditional blast furnace-basic oxygen furnace (BF-BOF) method, which emits around 2.1 tonnes of CO₂ for every tonne of steel produced. By contrast, electric arc furnaces (EAFs) which are more widely used in regions like the United States and the European Union, produce closer to 1.3 tonnes of CO₂ per tonne of steel. Globally, about 30 percent of steel is made using EAFs, yet in China, this cleaner method accounts for only 10 percent of total production¹. This imbalance highlights a clear gap in emissions efficiency, particularly in such a globally significant sector.
China’s cement industry is also very carbon intensive. China is responsible for over 50 percent of global cement production, a process that generates substantial process emissions. In 2019, Chinese cement plants emitted approximately 617 kilograms of CO₂ per tonne of cement produced. This figure is only slightly above European averages, which sit around 600 kilograms per tonne, and well within the range of U.S. emissions, which vary from 600 to over 900 kilograms depending on the technology and age of the plant² ³. While the differences might appear marginal on a per-tonne basis, the sheer volume of China’s output means these small gaps translate into a significant global carbon footprint.
This disparity is even greater in the chemicals industry. Estimates suggest that the U.S. chemical industry is between 10 to 40 percent more carbon-efficient than the global average, and up to 65 percent more efficient than China’s⁴. This efficiency is attributed to cleaner feedstocks, stricter regulations, and more modern infrastructure in developed economies.
How Tariffs Could Create Environmental Benefits
Although U.S. tariffs were not implemented with climate change in mind, they may nonetheless be creating indirect environmental benefits by shifting the economics of global trade. By raising the cost of goods from carbon-intensive supply chains, tariffs create a crude but effective price signal that begins to account for the environmental damage embedded in these goods. This can help level the playing field for producers operating under stricter emissions regulations or using cleaner production methods.
Tariffs may also influence purchasing behaviour and sourcing decisions in a way that favours lower-emission alternatives. As carbon-intensive imports become more expensive, companies and consumers may reduce consumption, switch to locally produced goods with a smaller carbon footprint, or turn to recycled materials and innovative substitutes. These shifts not only reduce emissions but also help develop more resilient, circular supply chains. The introduction of tariffs on high-emissions products can also act as a signal to the global market. When large economies like the U.S. begin to implicitly penalise carbon-heavy production, it creates an incentive for exporting countries to invest in decarbonisation. These behavioural shifts could become even more pronounced as countries begin to move toward formal environmental trade mechanisms, such as carbon border adjustment mechanisms - a process already underway in the European Union. In this way, tariffs may be playing a role in nudging global standards forward, even if unintentionally.
Environmental Gains vs. Economic Efficiency
Despite these potential climate advantages, it is essential to recognise the broader economic trade-offs that come with tariffs. Trade restrictions generally reduce global economic efficiency, often raising costs for consumers and businesses alike - especially those that depend on internationally sourced inputs. The result can lead to slower economic expansion, inflamed geopolitical tensions, and reduced competitiveness for firms that rely on low-cost manufacturing hubs. While the environmental benefits of tariffs might be meaningful, they come at the cost of deeper economic integration and can hamper innovation and productivity growth in the long run. The cleanest path forward may not be the most efficient, at least in the short term.
A Better Path Forward: Climate-Aligned Trade Policy
If governments are serious about aligning trade with climate objectives, then more sophisticated mechanisms are required. Carbon border adjustment mechanisms (CBAMs) represent a more effective and equitable solution. These instruments are designed to account for the carbon content of goods, creating a uniform emissions price for both domestic and imported products. When applied, CBAMs avoid the distortionary and arbitrary effects of broad-based tariffs. They incentivise cleaner production regardless of where the goods originate, and they do so transparently, giving businesses clear signals to guide investment and innovation. The European Union is already leading the charge with its implementation of a CBAM, and if adopted more widely, this model could reshape global trade in a way that more directly supports decarbonisation without the collateral damage of conventional trade barriers. The U.S.-China tariffs were never meant to address climate change. Yet by raising the cost of carbon-intensive imports, they are beginning to influence trade flows in a way that aligns with global climate objectives. These effects are real, but they are also incidental, and come with significant economic costs. For policymakers the lesson is clear, in that climate outcomes are too important to be left to the unintended consequences of unrelated policy tools. More targeted approaches like carbon border adjustments offer a better way forward. For investors and business leaders, understanding carbon exposure is essential not just as a regulatory risk but as a strategic consideration. As the global economy begins to place greater value on emissions efficiency, those best prepared for a climate-aligned future, whether through process innovation, supply chain localisation, or technological leadership, will be best positioned to thrive in the years ahead.
References:
In China, a small boost to low-emissions steelmaking can mean big cuts to its carbon footprint:
https://globalenergymonitor.org/wp-content/uploads/2024/03/GEM-China-steel-brief-March-2024.pdfChina’s provincial process CO2 emissions from cement production during 1993–2019:
https://www.nature.com/articles/s41597-022-01270-01Key Facts & Figures Publication 2021: https://cembureau.eu/media/lfqjyve5/key-facts-figures-2021.pdf
The U.S. Carbon Advantage in Chemicals Manufacturing:
https://clcouncil.org/reports/chemicals_advantage.pdf
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